Tilt Renewables directors advise against buyout offer

The independent committee of buyout target Tilt Renewables Ltd (NZE:TLT) has advised the company’s minority shareholders to not accept the joint takeover offer made recently by Infratil Ltd (NZE:IFT) and Mercury NZ Ltd (NZE:MCY).

The two suitors, together holding a combined stake of 71% in Tilt Renewables, seek to acquire the 29% they do not have in the Australasian power producer at a price of AUD 2.30 per share. This corresponds to a total sum of NZD 208.5 million (USD 136.5m/EUR 118m).

The independent directors have determined that the offered price per share is too low and that the proposal is inadequate and not fair.

“The offer price does not adequately recognise the value of the current operational assets and the strong pipeline of future projects,” said Fiona Oliver, chair of the independent director committee.

In a letter to shareholders, the independent directors named several reasons why existing investors should take no action with regard to the proposal, including the fact that the offered premium is only 8% above the closing price prior to the bid.

“This premium is materially below the average level for successful takeovers of this kind in New Zealand – even when the offeror already owns more than 50% of the target,” they said.

The directors also point out that the offer does not factor in the possibility of Tilt Renewables being successful with its bid into the Victorian Renewable Energy Auction Scheme (VREAS) for a portion of the future output from the fully permitted 336-MW Dundonnell wind project.

Regarding the suitors’ claims that a success with Dundonnell would require raising capital to complete the development, which in turn could result in dilution of shareholders not participating in the transaction, the independent directors said that such investors “are likely to be compensated for any dilution in their holding by being able to sell their entitlements”.

The offer must remain open at least until the end of October 15, 2018, the letter says.

Separately, the suitors said they have received the green light from the Australian Foreign Investment Review Board (FIRB) for the planned buyout. At the same time, the 50% condition has also been satisfied.

Tilt Renewables has eight wind farms with a combined capacity of 637 MW, giving it a roughly 11% share of Australasia’s total installed wind capacity. The company also has a development pipeline that exceeds 1,600 MW of planning approved wind, solar and storage projects.

(NZD 1.0 = USD 0.655/EUR 0.566)

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